Global Investment Review

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Global Investment review

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As the second edition of Global Investment Review goes to press, the tragic events of September 11 still loom large in people’s minds - so large, in fact, that it is hard to recall that the global economy showed signs of slipping into recession before this grim milestone on the landscape.

Despite the feeling that the world has suddenly turned upside down, we believe that it is important to recognise that there is no such thing as ‘normal’ investment conditions. Change is the order of life for investors. That’s the first inviolable investment ‘law’.

It is natural to look for more constants in our turbulent world. We think there are only two more: the places for governance and risk management in successful investment.

With governance, the key principle is that how you take your investment decisions is as important as what you do. Basically, the governance of institutional funds has tended to evolve piece-meal and most funds are in need of something like a ‘governance make-over’ to cope with their new challenges.

With risk, the problems of risk measurement are at tension with the importance of risk management. Basically, risk ranks alongside return in importance - if you find ways to reduce risk you can turn that risk into higher returns.

We think risks and opportunities are changing in a way that calls for funds to ask themselves the key question: Am I in the right strategic mix to meet my investment goals?

As single digit returns look likely for equities and bonds going forward, alternative assets look particularly attractive. The big caveats here are the limited capacity of these markets and the need for sound implementation. Which brings us back to governance and risk.

Roger Urwin

Features:

Global defined contribution – a world of contrasts While the US sets the pace, different markets around the world have adapted the DC model to suit themselves. The case for core-plus The promise of superior performance has led to runaway growth in core-plus bond mandates. Beware, only top managers have delivered! Hedge funds – too good to be true? As returns from traditional assets falter, hedge funds are attracting attention. But are they right for institutional investors? Rethinking the 401(k) market The time is right for bringing institutional investment practices to DC plan assets. The Myners Review of institutional investment What it means for trustees so far.

Research:

The world’s largest asset managers Asset growth slowed in 2000, but the top managers just keep on gaining market share. European equities set for dramatic growth Europe’s pension funds are poised to shrink their domestic allocations even more in favour of European assets. Risk budgeting – a global comparison Our interactive GAS VIII conference programme shows how pension funds and investment managers around the world regard risk. The Global Asset Study What it is, and how it provides insights into trends within the investment industry. Active currency management can add value Recent research by Watson Wyatt shows that managing currency exposure can improve financial efficiency.

Country roundups:

Australia Belgium Canada Hong Kong Ireland Japan Netherlands

Portugal Singapore Spain Sweden Switzerland USA